By Denis Jjuuko
There is a belief in the finance world that if you want to give poor people loans to develop, you selectively go for women in groups. Women, once they receive loans, are not known to splash the money on a much young sexual partner or buy stuff they don’t need such as luxury cars. Motherhood especially in Africa teaches them the discipline needed to survive.
Unlike most men, the majority of women think about their children before they commit crimes. If you are to default on a loan and sent to prison, who would look after your children is always a constant thought. So they ensure they put money to good use so they pay back their loans. On a general scale, group women enterprises have a higher rate of survival than those of men.
However, women face many challenges that exclude them from entrepreneurship. Their harvests are usually taken over by men who sell and use the money as they wish yet it's women who till the land in the first place.
Collateral needed by financial institutions is hard to come by. In many parts of Uganda, women don’t inherit land from their parents because in our patriarchal system, women are said to belong to the families where they get married. Yet their in-laws always look at them as outsiders thereby leaving them without the means necessary to acquire capital to do business.
But also, Uganda like most of Africa, is known for high interest rates on loans because the risks to lend are so high. Many businesses on this side of the world don’t celebrate their fifth birthdays. Doing business is relatively new in Africa compared to other continents so in most families, entrepreneurs are in their first generation without much mentorship. Short repayment periods are another challenge. Many times, when you borrow money today, you are expected to start paying it back at the end of 30 days when the business itself hasn’t even started.
However, I recently came across some interesting statistics and some weird news as well. I will start with the good news. The Ministry of Labour, Gender and Social Development started a women entrepreneurship fund some time back. They give money to groups of between 5-15 people. The money being loaned is from the government so it doesn’t accrue interest although if the payment period exceeds a year, an annual 5% service fee is charged so that the fund grows to support other women.
The beauty of this fund is that you only start paying back when your business starts generating income. For example, a group of women in Kibuku who export cassava gari and tapioca to West Africa was given money to buy equipment. They started paying back when they started exporting not when their machinery was still being fabricated.
In the last few years, the ministry has given out Shs23 billion and women have returned more than Shs19 billion according to a report. This represents a high repayment rate of 86.2%. A Bank Lending Survey Report for the fourth quarter of 2018/19 by the Bank of Uganda put the default rate in commercial banks at 60.7%. I will not go into the figures for 2020 due to disruptions caused by COVID-19.
The Shs23 billion had been disbursed to 13,000 groups thereby benefiting nearly 170,000 women directly across the country. Some groups can get as much as Shs12.5 million.
Some of these groups are growing into formidable businesses and have built the capacity to now deal with the commercial banks for expansion. These small loans have enabled them to learn the ropes of doing business like a group in rural Kasese which now sells crafts on eBay and exports to Europe and North America.
The weird news I referred to is that even after registering this success, instead of expanding the fund so more women benefit, the government is considering moving the fund to the Ministry of Local Government. Apparently, money must now be managed at the parish level, creating an unnecessary bureaucracy and a layer that may facilitate corruption.
Issues such as women empowerment should be dealt with by their respective ministries. There is no need to, for example, the Ministry of ICT to do the work of the Ministry of Finance just because they built the national information backbone that Finances uses to do its work.
The Local Government ministry can interest itself in ensuring that parish level monitoring takes place not necessarily to manage the fund.
The writer is a communication and visibility consultant. firstname.lastname@example.org
By Denis Jjuuko